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HMRC internal manual

Capital Gains Manual

HM Revenue & Customs
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Private residence relief: extended ownership period: transfer between husband and wife or between civil partners: example

Mr J and Miss S each owned a house when they married in 1952. After they married they used both houses as residences but, because Mrs J’s house was worth more, they nominated that house as the main residence (a married couple who are living together can only have one main residence between them, TCGA92/S222 (6), see CG64520). Mrs J died on 1 February 1989 and her house was transferred to Mr J at a probate value of £200,000. After his wife’s death Mr J moved out of the couple’s main residence and began to live only in the other residence he owned. The former main residence remained empty until it was sold on 1 January 2009 for £180,000.

Mr J made a loss on the disposal of the house which is computed as follows.

  Disposal proceeds 180,000
Less Cost 200,000
  loss (20,000)

Because of private residence relief only part of the net loss will be an allowable loss, see CG65080+. The result of Section 222(7)(a) is that Mr J would take over his wife’s period of ownership of the property, see CG64950. But the effect of Section 223(7) is that the period of ownership for the purpose of computing relief cannot begin before 31 March 1982, see CG64940-64943.

  • Period of ownership 31.3.82 to 1.1.09 = 321 months
  • Period of only or main residence 31.3.82 to 1.2.89 = 82 months
  • Final period allowed by Section 223(2) = 36 months*
The relief is 82 + 36 x £(20,000) = £(7,352)

The effect of the relief is to reduce the allowable loss to £12,648.

  • If the house had been disposed of on or after 6 April 2014 the final period exemption would be limited to 18 months see CG64985.